Sales tax

Since an affiliate marketer earns income from affiliate commissions, sales tax is generally not incurred. But if your affiliate marketing business expands to become a merchant and offers products (physical or digital), you may have to deal with this. (See Chapter 17 for more on merchants.)

Sales tax is usually levied by the state or local tax authority, and is usually a percentage of the sales amount. If you sell a product that costs $10 and the sales tax is 7 percent, for example, the customer should be charged $10.70. You will then have to remit the sales tax amount (monthly or quarterly) to the relevant tax authority. Keep in mind that you (your business) do not pay sales tax, but you do need to collect it and send it to the sales tax authorities.

One way to stay informed about sales tax and related issues is through places like associations, which are usually among the first to know about pending rules and taxes that affect businesses. Two organizations that are among the first to see such changes on their radar screens are the National Mail Order Association (www.nmoa.org) and the Direct Marketing Association. Of course, your tax professional or accountant should also be aware of the pending changes. . .

Dig into powerful tax deductions
As a general rule of thumb, expenses incurred by your business are tax deductible. The IRS makes the general point that an expense, to be deductible, must be “ordinary and necessary” to your business. While there is some gray area here, we think you know your business as well as anyone else, and deciding where spending is common and necessary in your business shouldn’t be a difficult decision. Of course, if you’re not sure, ask your tax preparer.

We realize that the burdensome thought of paying taxes can drive you over the edge—but fear not! Buried in tax regulations is good news. There are many juicy tax deductions available to you, and the first is in your own home.